By CYRIL TUOHY, managing editor of Risk & Insurance®
When important commercial insurance property brokers jump ship to Beecher Carlson from much larger firms, it's time for a peek under the hood.
Beecher, based in Atlanta, is doing very well, thank you very much. Part of Beecher Carlson Holdings Inc., the firm is slated to end 2008 with a record $88 million in revenue, a number which includes the firm's small managing general agent unit.
In 2007, Beecher hauled in about $75 million, up from $56 million in 2006, $34 million in 2005, $12 million in 2004 and $10 million in 2003, when the firm was bought out by management and Tom Golub, chairman and CEO.
Those kinds of revenues, according to one national ranking, place Beecher in the same league as Roanoke, Va.-based Rutherfoord Cos.; Wichita, Kan.-based IMA Financial Group Inc.; Tupelo, Miss.-based BancorpSouth Insurance Services Inc.; and Longwood, Fla.-based Insurance Office of America Inc.
From the standpoint of revenue, these brokers all trail in the rearview mirrors of the well-known multibillion-dollar machines that are Marsh, Aon and Willis HRH.
Beecher executives say it's just the way they like it, away from the money centers, the egos, the public scrutiny, the pressure and the constant change.
Bret Quigley, Beecher's chief financial officer, says the firm's growth since 2003 represents a compound annual rate of about 53 percent.
"We want to outgrow the market," he says. "It's about market share. If you enter a hard market, and while the market gets a 15 percent lift, then we would want to growth 25 percent that year. If the market is flat, then we'd want to grow 10 percent that year."
But Quigley stresses that growth for the sake of growth isn't what Beecher's about.
"If there are some great acquisitions either geographically or strategically and there's a fit for us, then we can make some acquisitions over the next two or three years or the next election cycle," he says. "If there are no acquisitions that make sense to us from a strategic perspective or a financial perspective, we won't do any."
The only notion that Beecher executives will admit to is that by 2012, the market can expect the brokerage firm to be larger, perhaps much larger.
"Could we be a much larger firm by 2012, absolutely," says Quigley. "If we just grow purely organically, could we be double where we are, probably. Just by bringing on some more people and continuing to leverage what we have, we could double our size without acquisition."
Reading between the lines, it's worth remembering that Beecher vaulted to the nation's 39th largest broker by revenue in 2007, up from 45th place in 2006, according to the Market Source Book list of the nation's top 100 brokers.
Beecher's traditional strengths are its captive insurance unit and its casualty insurance division. But in the past year, the firm's taken on some heavy-hitter brokers with a lot of depth in property, an area in which Beecher executives say they want to expand.
In 2008, the veteran brokers who joined the Beecher family include Stephen K. Levene, a powerhouse in the retail and restaurant segment and a former standout at Kansas City, Mo.-based Lockton.
Cliff Simpson, Joel Troisi, Michael White and Sarah Waite, former HRH brokers, will constitute the core of Beecher's push into property.
So, why are these brokers all Beecher bound?
Because the firm has allowed its producers to provide the attention the largest accounts require, according to Beecher executives. Not that Marsh, Aon, Willis HRH and Arthur J. Gallagher don't do that, or that other firms similar in size to Beecher don't do that either. It's just that Beecher has learned to walk a more careful line between generating profits and providing a service, according to Beecher executives.
"One of the reasons Cliff, Joel and Mike joined Beecher Carlson was the opportunity to have a significant impact on the results of the entire company," says Steve Denton, president of Beecher.
Founded in 1981 by Bill Beecher and Dave Carlson and still privately held, Beecher attracts brokers who join because they have the opportunity to be more intimately involved with the future of the company, notes Denton.
Levene joined after a decade with Lockton, a big, aggressive broker with $750 million in revenue. Simpson, Troisi, White and Waite, meanwhile, would have been the top property team had they stayed at Willis HRH.
Used to being big fish in big ponds, these brokers are all now big fish in a smaller pond, which means they'll be able to have a greater influence on the direction of their respective departments.
"They can and will move the needle on revenue growth at Beecher Carlson," says Denton.
Revenue is important, there's no denying that, but not at the exclusion of service, particularly for the largest accounts that require more infrastructure and attention because of the complexity of their risk coverage programs.
The folks at Beecher, by and large oblivious to the dictates of Wall Street, say they're willing to build their empire at their own pace. But when an opportunity presents itself such as happened last year with the Willis HRH merger, Beecher's managers aren't afraid to pounce.
"When you make the type of investment we made on the property side of our business, these are long-term investments," says Tom Golub, chairman and CEO. "These aren't meant to create the illusion that there's short-term financial growth."
He's confident financial results will always follow, and whether that happens sooner rather than later is less important than the quality of the people and a foundation built for a very, very strong long-term practice ... like Toyota, where managers think in 30- or 40-year increments.
OK, maybe not quite that long.
Levene, who brought major accounts like Yum! Brands and Frito-Lay to Lockton when he joined from Marsh in 1998, intends to move that Beecher needle, though not as a line producer but more as a leader guiding other brokers under him.
In the past, risk managers have called Levene "indispensable" to their insurance program and have described him and his team as providing a "night and day" difference from the programs offered by other brokers.
All well and good. But the reason Levene, 54, says he was attracted to Beecher was that it offered him a managerial role, rather than as an "out-front" producer meeting face to face with clients at every turn.
"I've got a sales team under me and really experienced producers and I'm more in a leadership position on a sales team rather than a front-line account director, or senior account executive," says Levene. "It works for Beecher, and they have leaders in the company that fit in those roles."
When considering his departure from Lockton, Levene also took a look at "McGriff and a few others." In the end, he left Lockton and all his big accounts back in Kansas City, coming to Beecher with only the shirt on his back, so to speak.
"I looked at other things, but I think Beecher is big enough of a platform for me to operate," says Levene. "It's only large accounts on most of the platform--big enough for me to operate any place I want to operate, and small enough for me to be a part of building a future."
His first 100 days, he says, made him feel like he'd been there for five years, not because it was a long three months, but because he feels as if he knows everyone and that he's become a veteran of the firm.
Beecher, he says, has jumped through hoops to differentiate itself in the marketplace. It provides enough for veteran brokers like himself to keep growing, yet is small enough for brokers to stay in touch with and close to their clients, which is what producers often like most about their profession.
"If you look back, historically we made a big splash when we hired the executive liability team. We made some really nice casualty hires, that goes back three and a half or four years ago," says Denton.
"All of these folks, in their jobs where they were, said, 'I'm moving further and further away from hands-on with the client, and that's what I really enjoyed the most in my career and I want to get back to,' " says Denton.
Yes, but other brokers are just as good at threading that needle--being big enough to attract talent from larger firms and being small enough for brokers to retain intimate, hands-on relationships with their clients.
"It's a people business, so why not set up your company to take care of people, clients, carriers, claims people, everybody?" says Simpson.
Take, for example, Minneapolis-based Hays Group Inc.; Houston-based John L. Wortham & Son; and Louisville, Ky.-based Neace Lukens Holding Co., to name but a few. These smaller brokers are no doubt just as committed to risk managers as Beecher Carlson. They, too, are set up as a "people business."
Perhaps, but Beecher holds one card more tightly than some other brokers of competing size. It maintains an important toehold in some of the nation's largest risk management accounts?Harrah's, for example.
Harrah's risk manager Lance Ewing, like most risk managers in charge of large risk coverage programs, likes to hedge his bets and split the business, in his case between Beecher and Willis HRH.
That's good news for firms like Beecher, which with one foot in the door always have a chance at competing for the rest of a Fortune 500's insurance business.
"The broker mergers in the 1980s and 1990s created less competition for risk management accounts," says Denton, himself a former risk manager for Ford and Aon broker. "Risk managers want more than two or three choices, which gives us an opportunity to grow like we have over the past four years."
Like other brokerages its size, Beecher provides expertise in industry sectors as well as expertise in lines of coverage. Its industry sector expertise extends to energy, gaming, healthcare, hospitality, manufacturing, real estate, retail and telecommunications.
It's insurance line expertise covers captive management consulting, property/casualty coverage, environmental risk, executive liability, claims management and consulting, loss-prevention services and services geared to tribal nations.
But what's particularly exciting about Beecher, according to executives and brokers, is that Beecher has a single profit center, Atlanta.
That's different than other firms in which local or regional offices around the country are responsible for generating profits, even if the brokers in those offices are not the best in a sector that the firm can provide.
"If you had a property guy that wasn't the best in the country but he was in our office, that's who you would get," says Levene.
Invariably, as a firm looks to get even bigger, locally-owned offices start to compete with one another. In theory, that's healthy. But in practice it's often a different story. Clients get short-changed as brokers spend more time fighting among themselves than they do fighting on behalf of clients.
That's not necessarily a business model that's better or worse, just different.
"Even the big houses struggle with wanting to map the expenses with the revenues locally, so you get into this matrix management and it becomes very difficult," says Simpson, who now leads Beecher's property practice.
Following the merger, for example, Willis HRH had more than 130 local offices with their own P&L statements, says Simpson, who had he stayed, would have been one of the top property brokers in North America for Willis HRH.
Simpson, who considered Lockton and McGriff, which is bank-owned, eventually settled on Beecher.
Few firms of its size offer what it does: It's privately held, it's staffed with veterans, it brings a tested analytics capability to bear, it includes a national distribution network, revenues flow to one P&L, and it offers an ambitious opportunity to work on some of the nation's largest accounts.
"It's hard to get that balance," says Simpson.
February 20, 2009
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